Marijuana stocks have attracted a lot of new investors lately, and nearly everyone associated with the industry is doing their best to take advantage of the cannabis craze by making it easier for investors to get exposure to the industry. Between cannabis cultivators listing their shares on major U.S. exchanges and institutional investors making partnership deals with rising stars in the marijuana market, it's easier than ever to tie your fortunes to those of the budding pot industry.

For investors who like diversification, exchange-traded funds are a great way to invest. Until recently, the best marijuana ETF option for most investors was ETFMG Alternative Harvest ETF (NYSEMKT:MJ), which has accumulated more than $1.2 billion in assets under management. Yet more recently, AdvisorShares Pure Cannabis (NYSEMKT:YOLO) threw its hat into the marijuana ETF ring. Unfortunately for AdvisorShares, although the new ETF has done a good job of attracting investors, a sluggish period for cannabis stocks has watered down what could have been an even more impressive showing.

Glass jar of dried marijuana buds, with ground-up cannabis and a joint on a wooden table next to the jar.

Image source: Getty Images.

How Pure Cannabis has done

From one perspective, Pure Cannabis has done a lot better than most new ETFs. From raising roughly $15 million in assets under management during its first week, the size of Pure Cannabis has grown dramatically, and the ETF now boasts almost $60 million invested in the pot stocks it's selected.

Yet there are signs that the new marijuana ETF hasn't gained as much traction as its sponsors would like. Average volume remains relatively weak at less than 200,000 shares per day, and that compares quite poorly with the 700,000 share average that Alternative Harvest has achieved recently.

Moreover, although $60 million is an impressive amount of money under management for Pure Cannabis, it still works out to less than $450,000 in management fees at the ETF's current expense ratio. That's not enough to make the fund economically viable over the long haul, and stands in stark contrast to the roughly $9 million annual fee revenue that Alternative Harvest should bring in based on its current level of assets.

Why hasn't Pure Cannabis taken off?

The biggest problem that the Pure Cannabis ETF has faced in its short history is the weakness in the marijuana market more broadly. Both Pure Cannabis and Alternative Harvest have seen their shares drop by roughly 4% to 5% in the past month. Although Pure Cannabis is beating Alternative Harvest by about a percentage point over that time frame, any losing performance is enough to put would-be investors on edge.

Much of that weakness stems from recent earnings results. Although major players in cannabis have seen their revenue climb dramatically in the wake of the legalization of recreational marijuana in Canada, it's far from evident when these companies will become sustainably profitable. Furthermore, uncertainty about whether and when the U.S. market will open up fully to cannabis production and sales remains high, especially in light of political tensions in Washington.

Long-term investors understand that it's totally unreasonable to judge Pure Cannabis and its management on the basis of a single month's declines. Portfolio manager Dan Ahrens and his team of analysts have adopted an active approach toward picking cannabis stocks, but no portfolio of marijuana investments will be able to keep rising indefinitely without declines along the way. It's just unfortunate from a marketing perspective that the most recent drop in marijuana stocks came so soon after Pure Cannabis opened its doors.

Watch for a Pure Cannabis rebound

Pure Cannabis ETF will ultimately need a stronger marijuana stock environment in order to attract the assets to make it a viable competitor to Alternative Harvest. Even with early challenges, Pure Cannabis has demonstrated its ability to play in the same league as its larger rival. If it can get timing on its side, then Pure Cannabis could be able to participate fully in the booming market for cannabis products in the near future.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.